Spending down on expectations for quarter

Retail spending nationally for the past quarter is down on economists' expectations with $66 million less spent on groceries, while Canterbury's rebuilding spending underpinned a slight gain in overall South Island sales.

When price changes are included, third-quarter to September retail sales fell 0.8%, having risen in the previous quarter 1.1%, and went against the run of economists' expectations in forecasting a rise of 0.5%.

Signs in data last week of a strengthening residential housing market arrived amid a surprise rise in annual unemployment to 7.3%, Statistics New Zealand said.

Following release of retail data decline, the New Zealand dollar fell 40 basis point to US81.65c, with the interest rate markets fully pricing in a 0.25% cut to the OCR by June next year, Westpac senior economist Michael Gordon said yesterday.

"The regional breakdown suggests that Canterbury's post-quake recovery continued to power ahead, with a 3.5% rise in sales (by value) lifting it above its pre-quake trend," he said.

While there were also gains in the other main centres, Auckland up 1.7% and Wellington up 0.6%, the rest of the country was seen as "very weak".

Now, with a weakening retail sector, some economists are questioning whether the Reserve Bank could consider lifting the interest-driving official cash rate earlier than late next year.

The largest gainer by far in the 15 retail areas was led by the Christchurch rebuild, which boosted hardware, building, and garden supplies to gain by 4.2%.

With inclusion of price increases, that gain was 3.6%, or $42 million, Statistics New Zealand said yesterday.

Around the South Island, the sales rise came from an overall $80 million, or 3.4%, rise in Canterbury, with "the rest" of the South recording a downturn of $50 million, or 2.5%.

Yesterday's data was more confirmation the economy slowed in the September quarter, after strong growth in the first half of the year, Mr Gordon said.

"Indeed, at this point we can probably consider the third quarter a write-off. It's clear that quarterly gross domestic product growth will be weak, quite possibly negative, with the question now being whether this is the start of a new trend," he said.

Statistics New Zealand industry and labour statistics manager Blair Cardno said over the longer term, the trends for both total sales values and volumes had eased back since the strong growth in 2011"Shoppers spent less in just over half of the [15] retail industries this quarter," Mr Cardno said.

ASB economist Daniel Smith said the recovery "remains patchy", as demonstrated by yesterday's retail decline data and last week's surprise rise in unemployment.

"Retail price growth also remains subdued, even looking past the standard falls in electrical goods prices. We continue to expect the Reserve Bank to keep the official cash rate on hold until September 2013," she said.

 


Spending less at ...

• Supermarket and grocery outlets: down 1.6% or $66 million
• Motor vehicle and parts retailers: down 1.8% or $41 million
• Fuel retailing: down 1.9% or $35 million


simon.hartley@odt.co.nz

 

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